Finance Monthly January 2020 Edition

By limiting investments to only ethically- focused companies, investors are limiting the pool of investments that can be selected from. That said, since the UN Principles for Responsible Investment were introduced in 2006, investors have started to see the likes of the Vanguard Group and Fidelity Investments increasingly offering ethical investing; a trend which doesn’t show signs of slowing. Guido Fürer, the Chief Investment Officer for Swiss Re, has also said that it is ‘doing good’, and that it ‘makes economic sense’. Investment Managers, PortfolioMetrix, have also added a selection of Ethical Portfolios as part of their offering. This means that investors can maintain the same risk level as they do with their portfolios, the only difference being that the underlying holdings will then meet the criteria for an ethical portfolio. Where some may be mistaken though, is that this isn’t an all or nothing choice. Moving entire portfolios over to ethical ones might be rather risky, but you could, for example, move your ISAs to a more ethical approach, whilst leaving your pension in the more traditional investments. However, this is an area that is important to research and know well before committing. In terms of where people might invest, the choice here is huge and is improving all the time. As the world becomes more socially-aware and green movements such as Extinction Rebellion and the work of green activists such as Greta Thunberg are recognised, more investors care about where their capital is sunk into. Sustainable finance takes many forms, but here are a few examples that 2020 might see heralded as the norm from now on: Social Business: While this is nothing new, this kind of sustainable finance refers to businesses who not only turn a profit but also have social issues at their heart. Profits are invested back into the business in order to combat exclusion, protect the environment or promote development and solidarity. They can take many forms, all of which you can expect to see more of throughout 2020, namely: ● Social Impact Bonds (SIB): Bonds that are repaid to investors once a project’s social objectives are met. ● Microfinance: A solution that opens up credit to more disadvantaged populations. ● Impact Investing: Putting one’s savings in companies with a strong social or environmental impact. Green Finance: Sometimes regarded as an arm of SRI, it combines those financial transactions that favour the 12 www.finance-monthly.com FRONT COVER FEATURE - SUSTAINABLE FINANCE